Effective management of an institution’s growth and ability to meet the challenges of a changing business, regulatory, and economic landscape requires constant attention to updating corporate governance.
CAMELS’ principal has worked for many years as co-director within a highly recognized bank specific legal firm directing corporate strategies requiring continual attention to the ability of client institutions to remain competitive. Increasing shareholder value is driven most often by an institutions ability to be positioned to take advantage of market opportunities. Periodic updates to governance structures will keep your institution competitive.
The Board Role
An organization’s Board of Directors must provide management operating flexibility and capabilities to ensure increasing value to shareholders.
Often boards are presented opportunities by management only to be impeded because of outdated articles of incorporation or code of regulations. Updates to these operating documents require changes to be presented at either the annual shareholder meeting or by calling for a special meeting of shareholders. Both are impacted by timing issues and cost.
Other issues of approval also must be considered, instead of asking shareholders for a change of governance for some unknown future event, many times the changes are a result of a specific need that is often challenged and occasionally thwarts passage.
How to Review Governance Documents
It is important while reviewing current governance to do so with a strategic vision in mind. For example:
- Do you have an anti-takeover structure in-place?
- Do you have a well-defined process of board nomination and election?
- Do you have a well thought out exit strategy for directors and perhaps a grooming process for board members?
- Is there a requirement of stock ownership for board placement?
- Do you have specific policies to advance shareholder ownership?
- Have you investigated a Two-Tier Board Structure (Bank Board/Holding Company Board)?
Capital raising is most often the foremost objective of boards, which establishes the need for immediate reflection of whether the institution has a shareholder rights requirement, preferred shares and adequate authorized but unissued common.
Does the board have a stock ‘buy-back policy’ or new shareholder minimum purchase requirement? Is there a dividend policy? Does a separate board policy of self-monitoring exist? Is there an expenses reimbursement policy or a policy that allows a board member to provide services to the institution? These are all key queries to consider when reviewing governance documents. Implementing shareholder ownership programs is key to remaining a viable ‘private’ banking enterprise to your community.
“CAMELS provided guidance in structuring a Dividend Re-Investment Program, Capital Raise, and instituting a Self-Directed IRA addressing risk and compliance within our holding company and bank structure”